Selling Your Business – Be Your Own Banker
If you are a Baby Boomer who is trying to sell a business, this is obviously a difficult time. I know of several professionals who are trying to sell practices, and they are finding that they must “be the banker” for the transaction, since the buyer cannot get bank financing.
A recent Wall Street Journal Small Business Link article notes that small business owners are increasingly forced to provide contracts for buyers. If you need to sell your business, here a couple of tips:
Get Your Business in Order. I mean, clean up. Clean the offices and your production areas before you invite potential buyers.
Prepare financial documents. Buyers will want to see your business tax returns for at least three years, your sales for the past two years, and all contracts you have signed with vendors. As part of the sales process, you will need to have an appraisal of your property and of all assets; you can also have your CPA give you the depreciated value of equipment and vehicles.
Determine goodwill. You will need to estimate the value of your customer base, to find goodwill. Since goodwill is an intangible, you will have to substantiate it with sales figures.
Find your bottom line. Actually, you will need to have two figures in mind – a publicized sales price, and your actual bottom line, for the negotiations. The difference will probably be goodwill.
Determine your selling options. Think about the terms of a sales agreement that would be advantageous to you. How long would you like to be paid? How much would you want each month, each year? Talk to your tax adviser and look at the effect of options on your tax situation.
Think about transition. How long do you want to stay to help smooth the transition? A longer transition might help the buyer, but it might not be right for you.
Place Ads. BizBuySell and other online business advertisers (I wouldn’t call them brokers) can help you with online advertising.
Prepare contracts. You might want to get your attorney on board early, to prepare contract language if you need to act as the banker.
I will have more about negotiating business sales contracts later this week. In the meantime, is it time for you to start thinking about selling? One of the most difficult tasks is getting your mind around the idea that you are selling this business you worked so hard to create.
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